In line with the growing profile and depth of the legal services industry, the Ministry of Justice (MOJ) has promulgated new measures for the administration of domestic law firm names. The new legislation, Measures for the Administration of Names of Law Firms, aimed to strengthen management systems and standardise the use of law firm names, repealing similar legislation that was enacted in 1995, is critical as the number of law firms in China balloons to15,000 in 2009.

There are six chapters and 30 items which provide clarification on the rights and obligations of a firm and its name. The legislation also further regulates the composition of a firm’s name and that of its branch offices.

Prohibited uses
One of the notable aspects of the new legislation is the prohibition of the usage of specific phrases like ‘legal group’（律师集团） or ‘law alliance’（律师联盟）.

“The use of labels like ‘legal group’ or ‘law alliance’ is not legitimate as firms with these labels are unregulated and do not operate under a standard business procedure,” an MOJ spokesperson explained. “Some of these firms are formed by a consortium of smaller firms which operate independently and therefore cannot identify a head
office.”

‘Legal groups’ structured in the way referred to by the MOJ are expected to be most affected by the new measures, but not all are happy about it.

“Firms often undertake the name of ‘legal group’ or ‘legal alliance’ because it implies a larger-sized firm with significant resources. These ‘legal groups’ do not share resources or split earnings and so removing the term defeats the purpose of what the phrase was intended to imply,” said Li Daofeng, a partner of Grandall. He said his firm operates differently, as it is the only law firm in China that is registered with the MOJ. All other domestic firms are registered with their own regional and district judicial offices.

Grandall was given the status of ‘legal group’ as a pilot project, when the firm established itself in 1998 via a merger of Beijing Michael Zhang & Associates, Shanghai WanGuo Law Firm and Shenzhen TangRen Law Firm. “At the time of Grandall’s establishment, it was the MOJ’s initiative to label us a ‘legal group’ in view of the unique business structure,” said Li.

“Before the promulgation of the new measures, we were approached by the MOJ in an attempt to resolve this issue. We are currently still negotiating terms with the authorities since our circumstances are different,” said Li. He said that Grandall is now recognised as a brand so it is unlikely that the firm will be affected by the omission of the term ‘legal group’ from its name.“Even if it comes down to changing our firm name, I don’t think it will cause a big impact on our business. All we would have to do is to omit ‘legal group’ and have our name as Beijing Grandall Law Office (北京国浩律师事务所).”

Renaming branch offices
The MOJ has also recognised that domestic firms are increasingly expanding via absorbing or merging with smaller regional firms. Consequently, another clause in the new legislation stipulates the specific naming requirements for a firm’s branch office – province of headquarters, name of firm and city of branch office.

For example “Zhong Yin Law Firm Shenzhen branch” will have to change to “Beijing Zhong Yin Shenzhen Law Firm” (中银律师事务所深圳分所－北京中银(深圳)律师事务所).

Having to use the term ‘branch office’ (分所) in a name has been unpopular with some firms as it connotes separation of a firm’s branch office from its headquarters, in terms of competency. The term has hindered the development of branch offices as they have been perceived only as being subsidiary operations by potential clients. The change also reflects recognition on the part of the MOJ that the old rules are no longer proficient for the current legal market.

Branch offices, it is hoped, will now be perceived as being on the same level of professionalism as their headquarters and will consequently feel the need to improve the quality of services provided.

The potential costs to law firms to rename their branch offices is unknown, with firms like Dacheng and King & Wood (with over 28 and 16 Asian branches respectively) set for a lot of work to implement the changes.

Fair competition
Chinese firms that have been notorious for having similar brands that are often hard to differentiate between are now subjected to scrutiny for having misleading or potentially deceptive titles. While in the past, smaller and newer firms may have benefited from indirect associations with firms with bigger reputations, the new legislation aims to make this impossible in the future.

Lawyers are mostly in favour of the changes.  “There are quite a few cases where there are domestic firms who have named their firm very closely to that of an international firm. That is an unethical method and should be discouraged,” said Henry Mao, a partner at Jin Mao P.R.C. Lawyers.

“Law firms are service providers and clients need to be able to identify the most suitable legal service providers to fit their business needs,” he added. “When firm names fail to provide the most basic purpose of identification, clients end up with a firm that does not tender what it implies it can.”

The new legislation is part of China’s increasing efforts to restructure its legal system and lawyers agree that the timing of the legislation is perfect. “With all the newcomers and firm expansions going on, there is definitely more need for stricter regulations,” said Grandall’s Li.